Tuesday 19 January 2021 6:15 pm

Sadiq Khan backs CBI's calls for furlough extension

The mayor of London has backed calls from the CBI for further financial support for businesses, saying current deadlines create a “financial cliff edge”.

The business group yesterday urged chancellor Rishi Sunak to extend the furlough scheme for two months beyond its current expiry date of April, and to provide “targeted support” for businesses over the summer.

Read more: City salaries up this quarter as London weathers worst of 2020

The CBI also called on the Treasury to extend the business rates holiday for at least another three months for UK firms forced to close under current restrictions, and to expand financial relief to supply chains.

Sadiq Khan said the demands were “absolutely right”, adding that “London’s businesses and workers need further action in the forthcoming budget to protect jobs”.

“Current plans to end the business rates holiday in March and then the furlough scheme in April create a huge financial cliff edge for employers,” he said.

“Without the certainty that support will remain in place for as long as it is needed, many more businesses could decide to cut their losses and close permanently now.”

The mayor warned that economic activity would not return to pre-pandemic levels overnight “even with the rollout of the vaccine”.

“It’s essential the government continue to support businesses through the rest of the year. Supporting employers to keep people in work over the coming months will be integral to a successful economic recovery from Covid,” he added.

The CBI, which represents around 190,000 British businesses, joined a chorus of business bodies — including the British Chambers of Commerce (BCC) — in calling for temporary VAT cuts.

It urged Sunak to lengthen repayment periods for existing VAT deferrals until June 2021 “at the earliest”, and to implement deferrals on VAT bills due now until 2022.

“Almost a year of disrupted demand and extensive restrictions to company operations is taking its toll,” said CBI director-general Tony Danker. “Staff morale has taken a hit. And business resilience has hit a sobering new low.

“The government must once again stand shoulder-to-shoulder with businesses to underwrite support for the duration, helping viable enterprises to last the course… The rule of thumb must be that business support remains in parallel to restrictions and that those measures do not come to a sudden stop, but tail off over time,” he added. 

“Just as the lifting of restrictions will be gradual, so must changes to the Government’s sterling support to businesses.”  

It comes after the BCC last week called for a raft of further financial support measures, as its quarterly survey revealed that four in ten firms have seen their cash flow drop during the coronavirus crisis.

The latest unemployment figures showed more than 800,000 people lost their job in 2020, with the jobless rate increasing by 1.2 per cent to 4.9 per cent in the year to last November.

BCC director general Adam Marshall said: “The support schemes the government has introduced so far have saved many firms and jobs, but they have not gone far enough to help many survive a tough start to 2021. 

“The drip-feed approach to business support measures has meant many firms simply cannot plan for the future. 

Read more: Rishi Sunak mulls over a UK corporation tax hike in March Budget

The chancellor has so far spent £280bn during the Covid crisis, taking the UK’s deficit to record levels.

Sunak told City A.M. last week that the Square Mile is set for a “Big Bang 2.0” in the wake of both Brexit and the pandemic that will take the City’s “culture and creativity” to greater, global heights. 

Foreign secretary Dominic Raab yesterday indicated that ministers are keen to “get out of these national lockdowns as soon as possible”, adding that current measures will begin to be eased “`hopefully by March”.

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